Murray International, the £1.3 billion investment trust run by bearish manager Bruce Stout, has warned of optimistic complacency in stock markets.
The global growth and income fund, managed in Edinburgh for Aberdeen Asset Management, has reported a 5.4 per cent total return for the first half of 2014, against 2.8 per cent for its 60-40 world and UK benchmark.
Demand for the trust has prompted the company to issue almost £350 million of new shares at a premium to asset value in recent years.
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In the first half, Mr Stout reduced the portfolio's equity gearing to 102 per cent when he added to its holding of emerging market bonds, taking advantage of weakness.
He said: "It is the first time I have had the opportunity to buy emerging market debt since 2008. We only increase exposure if we believe something is genuinely undervalued."
Overall gearing was about 113 per cent, he said. The fixed income part of the portfolio made a return of 7 per cent during the period.
Chairman Kevin Carter warned investors "continued to pay increasingly higher prices for equities".
He added: "Highlighting a widening disconnect between asset prices and the real world of negative income growth and subdued corporate profits, a mood of optimistic complacency prevailed."
Mr Stout commented that US corporates were relying on share buybacks and were "sitting on awfully high multiples".
He added: "There have been an awful lot of profit warnings in the last three or four months, particularly in the UK, where the strength of sterling has really impacted companies' reported profits. It highlights how stretched valuations are."